Corruption in USAID Georgia

What are the missions of these organizations, and corruption in USAID and various EU funded programs are well known to locals and others alike. As Jeffrey K. Silverman, Georgia based journalist, wrote some years ago, “it is easy to become inured to discussions about corruption in Georgia. “Corruption is a plague” has a commonplace for politicians and journalists alike. Similarly pat are the explanations why corruption never seems to be cut back: the frozen conflicts with Abkhazia and South Ossetia, the tensions between central government and the regions, the overweening and sometimes threatening presence of Russia. In such circumstances, apparently, the state is weak and cannot be stable and orderly.

But what largely escapes critical attention is just how vast the international presence in this small country is, how much effort and money has been put in to so little effect. Georgia teems with NGOs and aid organizations (roughly 5,000), so much so that it has become known as an “NGO heaven.” But their impact has so far been limited. The persistent but rarely reported rumors of corruption in the sector suggest one reason for their ineffectiveness. Twelve years after the collapse of the Soviet Union, the relative failure of NGOs and aid organizations calls for a review of their policies.

Lifting the lid on a can of worms is usually difficult. The non-profit sector is no exception, so it is hard to say quite how worm-ridden the sector actually is. Nor, despite some investigative coups, does the local press have much interest in embarrassing countries whom Georgia owes a debt of gratitude. Still, the sheer volume of rumors suggests there is a major problem–and a few worms do surface. In 2003, the U.S. government recouped money that had been siphoned off from a development program for small businesses into an offshore bank (misleadingly) called Shore Bank.

It is the only documented instance of some money being recouped. There are accusations of corruption in CARE and United Methodist Committee for Relief, both offshoots of the U.S. government’s aid program USAID, reports of Georgian banks “losing” U.S. government funds, European aid to a micro-finance bank being pocketed

Admissions are rare. The closest to one came in an email from a federal agent who over the past year has investigated several NGOs for USAID’s inspector general, the criminal investigative branch of USAID. “The UMCOR thing,” he wrote, “was closed before I ever came over there and the CARE issues have been investigated and resolved … USAID brought it to our attention soon as they got wind of a problem. Embezzlement. Return of the money. That’s it, I can’t give out any details.”

However, the number of shakeups and firings in the organizations is an indirect admission of the scale of mismanagement and, possibly, corruption. Even so, there is no review of policy as a whole. While ministers and heads of NGOs claim that they know what needs to be changed, little is achieved. They need to look more clearly at the layers of problems.

Money cascades down through various levels. At each there is a problem of interests that detract from the final result. For donors, there is the feel-good factor. Spending money and listing the beneficiaries is paramount. To justifying a project, minor success stories become major success stories. The result is a large gap between needs and action, between achievement and statements. Below that comes a thriving level of intermediaries. Larger organizations often operate pool funds. A local partner, who passes the money to partners to implement the projects, handles the funds. The more levels, the more chance there is of money being diverted. Then there is the composition of the staff. In some cases, donors’ try to forge “ties with the local community.” Professional skills are not the decisive factor. The result is that senior local bureaucrats, politicians, and businessmen gain positions. This is part of the problem with the credit unions set by ACDI/VOCA in 1993 and part-funded by the U.S. government. Some of the most notorious corruption in Georgia has involved Micro and SME Credit activities in the South Caucasus countries of Georgia and Azerbaijan. It is hardly accidental that programs have been so unsuccessful that there is even doubt if they were even intended to be effective from the very start. The lineup is impressive as are the case studies: Activities and looted over the years in Georgia and Azerbaijan include Shorebank Advisory Services (SAS), ACDI/VOCA, Save the Children, CARE International and the International Rescue Committee (IRC) and its local partners.

One of the largest impediments to rural development in Georgia and the region has been the relative inability of farmers to access credit at reasonable terms and without having to pay extra fees.

There has been a developing discussion and debate centering around the transparency of organizations in Georgia who receive USAID grant money. It has been very interesting, but a lot to soak in with so many posts on so many blogs to follow. So, I want to try to post a condensed form of the discussion for anyone who wants to make it a quick read or play catch up. I think that it is an important enough discussion to warrant this and hope that it can flesh out the discussion beyond the present scope. Of course, I will link to the full posts and encourage everyone to actually read each post as I will just be summarizing and picking out a few quotes.

Please point out anything I may have missed or misstated as there is a lot and I want to reduce it as much as I can without missing the arguments made by each post; I will update as I find more posts and more responses come in.

May 24 PhD candidate Till Bruckner guest posts on the AidWatch blog describing how, while working for Transparency International (TI) in Georgia, he requested 12 NGOs to publicize their budgets. Only Oxfam GB complied. Ten of the remaining 11 got together and wrote a letter saying, “there are a number of legal and contractual implications involved with donors, head office and other stakeholders which will take time to resolve.” He tried USAID with the Freedom of Information Act but was met with the response that they need the permission of the NGOs.

Aug 18 PhD candidate Till Bruckner guest posts again on the AidWatch blog after he is mentioned in a recent OpEd by Bill Easterly. In it he picks up from his May post to update that USAID finally released the budgets of 19 UN bodies. Strangely, the white pages had a lot of black that was not type but covered information. Till asked why so much ink and USAID explained that, “the opportunity to address how the disclosure of their information could reasonably be expected to cause substantial competitive harm.” Brucker goes on to question the commitment of organizations to transparency. He names UMCOR, Mercy Corps and AIHA as most transparent; Save the Children and CARE in the middle; and CNFA, World Vision and Counterpart International as the least transparent. He finishes by saying that USAID needs to get better at releasing information requested and NGOs need to match their actions with their verbal commitments to transparency

He takes a different approach to the definition of what transparency is by saying it should ask what the money did not where it went.

To him budgets do not guarantee a lack of corruption as they do not specify what is actually done with the money. Audits function as this check.

Recipients are have problems with impact, not process

Sharing budgets could be damaging to nonprofits applying for grants.

Aug 19 The Transparency Extremist jumps into the fray and comments on the posts by Gilmore and Bruckner. He makes the following points in response to Gilmore:

As taxpayers and funders of programs, it is our right to know how our money is being spent.

If we could see the actual budgets across the board, there would be no need for audits.

Bids would be helped by complete transparency across the board, not harmed by it. All bids should be published and made public to ensure everyone involved is held accountable.

Later That DayGilmore responds to the Transparency Extremist and other comments with the following counterpoints:

Transparency is not asked of from civil servants and government organizations for privacy and safety. Fair bidding will be impossible to achieve through transparency as it will expose organizations to others that will undercut.

Complete budgets will still allow for people to hide corrupt acts such as bribes. Audits are a far better option.

Transparency is important in ensuring impact, but impact should be a large emphasis when making the evaluation.

Aug 20 Bruckner comes back with a response to Gilmore. He says, “As a taxpayer, I have the right to ask what my money is being spent on as well as the right to ask what those expenditures actually achieved. Plus, if I cannot even find out what the total cost of a project was, how can I judge whether it was worth my money?” Blacking out budgets will make it hard to understand how the money is being used for things like evaluating what portion of the budget filters back to the donor country. He adds that calling for transparency from the outside prevents NGOs from hiding behind claims of keeping themselves accountable. He finishes by saying that transparency will help to avoid backroom deals and improve inter-agency learning. If Oxfam and others can do it, why not all of them?

Later that Day Gilmore returns by saying that Bruckner is partially right but so is he. He agrees in principal to a lot, but is evaluating not from the perspective of economic research but from one of combating corruption and improving impact. Taxpayers should know total budgets, but line items will have a negative impact on competition. It is unfair to be critical of NGOs competing for grant money as it is a part of their mission to bring in as many resources as possible to accomplish their stated missions. While transparency as a tool for research is valuable, its main goal should be to focus on results rather than process.

Even Later that Day Aid Watch posts a response email from CFNA to the original post from Bruckner. In it they reaffirm their commitment to transparency saying that it is one of their core values. They state that their results speak loudest and it would be detrimental to their efforts to publish the complete budget. It complies with all reporting requirements imposed by donors and believe that the records they have made available coupled with their results speak to their success as a program.

Aug 21World Vision makes a statement to Aid Watch that is posted on the blog. While reaffirming their commitment to transparency, World Vision stated that they were not aware of the request made by Bruckner or their own request to USAID to redact information. Upon contacting USAID they learned that the redaction was made independently by USAID.

Aug 24 Bruckner responds to the statements made by World Vision. He shows excerpts of correspondences he had with USAID where he was lead to believe that all NGOs were contacted after his initial FOIA request and that the resulting documents were based on such contacts. When following up with CNFA’s response email, they were asked if USAID had contacted them in regards to Bruckner’s request and have yet to reply. In contacting USAID, Aid Watch learned that it is standard practice to notify all NGOs involved when a FOIA is filed. If there is no response, “USAID redacts trade, commercial, financial, and personally identifying information in order to protect USAID’s and external organizations’ business and personal data.” Bruckner questions why it would be in the interest of organizations to reply to such requests as they are not compelled to and doing so forces USAID not to disclose.

Later That DayMercy Corpsresponds to the request for a comment. Glad to be considered transparent, MC is troubled by the fact that the willingness to release project budgets is being used as an measure of the accountability of NGOs to beneficiaries and stakeholders. They continue to tell how TI and Bruckner had poorly engaged them in requests for budget information. They then ask and address three questions:

1) Does budget-sharing constitute accountability?

“Posting the raw budgets of a handful of agencies reveals little about whether those agencies are effective, whether they are accountable to their beneficiaries, or whether their cost structures are reasonable.”

2) How does accountability make aid more effective?

“This is best achieved when the beneficiary population is involved in the design, implementation, and monitoring of that activity. This integration of stakeholders into core parts of the project management process ensures that divergence between community needs and NGO deliverables is kept to a minimum.”

3) What constitutes accountability to our constituents?

“At a program level, NGO accountability means providing community stakeholders with means of evaluating a project’s goals, the appropriateness of its implementation strategy, and ultimately its effectiveness in meeting those goals. Publicizing budget data may be a part of the approach depending on the context — but it is not a substitute for a project methodology that puts a core focus on community priorities and community participation.”

Mr. Bruckner has been gunning for CARE, Save the Children, World Vision and IOCC in Georgia for many months now. He tried publishing an expose through his former employer Transparency International that refused to run the article after meeting with the agencies and becoming concerned over the veracity of Mr. Bruckner’s charges. He then filed a second complaint with the Humanitarian Accountability Project (HAP), which also found no substance to the complaint. He then filed a third charge through InterAction, which also went nowhere. Mr Bruckner did not interview the agencies he targeted as part of his research, nor did he attend a meeting at TI where WFP and its partners disputed his claims. Did he let it rest? No. He went ahead and found somebody to publish his claims anyway — The American. Why so dogged? Well, maybe its because his PhD. thesis is based on these allegations in Georgia.

August 26 Master of Public Policy student at the Woodrow Wilson School of International Affairs and Public Policy at Princeton University and Madagascar native, Lova Rakotomalala, adds some thoughts at the end of his recent post by comparing transparency to fans of the L.A. Lakers.

This debate can be tied to the other debate about overhead for non-profit organisation.

In sports, fans care about how the budget is allocated: players salaries, luxury tax etc.. but at the end of the day, LA Lakers fans would not have cared one bit that O’ Neal made 30 millions more than Karl Malone in 2004 had they had won the whole thing. They want to know why they did not win and only then wold they wonder about the discrepancies in salaries. Was the fact that salaries were so unbalanced a factor? Probably but it is an issue only because 1) they did not come through 2) The chemistry may have been disrupted.

The chemistry factor needs to be assessed first before we worry about whether K. Malone was underpaid.

La Lakers fans care only about championships. Similarly aid recipients will only care about how, in the short and long run, this aid project will affect their lives.